Asia report: Stocks mixed as consumer inflation softens in China

Asia-Pacific stock markets were mixed on Thursday as investors analysed the latest inflation data from China, which showed a softening in consumer price increases.

“Asian markets followed Wall Street's indecisive lead,” said Patrick Munnelly at TickMill Group.

“The US session ended marginally positive on the day, after choppy trading as Fed chair [Jerome] Powell’s encore on Capitol Hill was deemed less decisive by investors.

“There appeared to be a tapering of Tuesday’s distinctly hawkish messaging.”

Munnelly said Powell looked keen to clarify that the FOMC had not yet made any decision with respect to the scale of rate hikes for its meeting on 22 March.

“Overnight data from China also weighed on risk appetite as softer consumer and producer price data was compounded by consumer prices registering weakest growth over the past twelve months.”

Equities mixed with particular weakness in Greater China

The Nikkei 225 in Japan increased by 0.63% to 28,623.15, while the Topix rose by 0.97% to 2,071.09.

Among the leaders on Tokyo’s benchmark were 7-Eleven owner Seven & i Holdings, Resona Holdings, and Ajinomoto, which rose by 4.09%, 3.93%, and 3.5%, respectively.

In China, the Shanghai Composite index decreased by 0.22% to 3,276.09, while the Shenzhen Component dropped by 0.16% to 11,579.99.

The poorest performers in Shanghai were Appotronics Corporation and Beijing Qianjing Landscape, which fell by 6.53% and 4.75%, respectively.

Hong Kong’s Hang Seng Index dropped by 0.63% to 19,925.74, led lower by China Resources Mixc, Haidilao International, and Country Garden Holdings, which declined by 4.7%, 4.54%, and 3.9%, respectively.

The Kospi index in South Korea declined 0.53% to 2,419.09, with Isu Chemical Co down 15.83% and Cosmo Chem losing 14.34%.

In Australia, the S&P/ASX 200 index increased 0.05% to 7,311.10, led higher by Xero and Appen, which rose by a respective 10.66% and 9.05%.

The S&P/NZX 50 in New Zealand meanwhile fell 0.25% to 11,826.15, with Serko and Scales Corporation declining 4.17% and 2.94%, respectively.

On the currency front, the yen strengthened 0.86% on the dollar to last trade at JPY 136.18, while the Aussie advanced 0.43% to AUD 1.5111, and the Kiwi was ahead by 0.49% on the greenback at NZD 1.6296.

In oil, Brent crude futures increased 0.15% on ICE to last trade at $82.78 per barrel, while the NYMEX quote for West Texas Intermediate added 0.05% to $76.70.

Inflation softens in China, economic growth slows in Japan

In economic news, China's consumer price index for February rose 1% year-on-year, falling from an annual increase of 2.1% in January and below forecasts for 1.9%.

At the same time, the producer price index for February declined 1.4% year-on-year, deeper than the 0.8% contraction in January.

“China’s consumption rebound is likely a bit slower than the tourism data over the Lunar New Year Holiday period suggested,” said Duncan Wrigley at Pantheon Macroeconomics.

“In hindsight, the burst of holiday spending reflected the release of pent-up demand after the ending of zero-Covid policy.”

Wrigley noted China’s conservative ‘about 5%’ GDP growth target announced recently at the ongoing National People’s Congress, as well as “modest support” focussed on investment sectors rather than consumption.

“As a result, we expect the consumer recovery to continue at a gradual pace, while people assess their income and employment prospects."

In Japan, GDP growth was slower in the October-December quarter, expanding by only 0.1% on the year due to weak private consumption, lower than preliminary estimates of 0.6%.

Meanwhile, a poll from Reuters suggested the Bank of Japan looked unlikely to make changes to its monetary policy in its upcoming meeting, maintaining its uber-easy stance and holding the benchmark rate at -0.1%.

“The GDP data are likely to confirm the Bank of Japan’s assessment that the domestic economy is faltering and that current easy monetary policy settings are appropriate,” Pantheon’s Duncan Wrigley added.

“The Bank probably will leave policy settings on hold at its meeting tomorrow, the last to be chaired by outgoing governor Kuroda.

“Incoming governor Ueda is unlikely to make abrupt policy changes, after telling the legislature that he views easy monetary policy as ‘appropriate’ for current economic conditions.”

Elsewhere, Malaysia's central bank kept its overnight policy rate at 2.75% for the third consecutive session.

Bank Negara Malaysia noted the country’s consumer price index was up 3.7% year-on-year in January, and was expected to moderate this year, adding that the economy would see slow, gradual growth driven by domestic demand and rising tourism activity.

Reporting by Josh White for Sharecast.com.